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Deep Technical & Financial Expertise Required for Geothermal Capital Formation

The United States led all countries at the end of 2009 with over 3,000 megawatts (MW) of installed geothermal power generation capacity, approximately one-third of global geothermal capacity estimated at 10,000 MW.  Casting an even brighter glow around U.S. geothermal power development, the Geothermal Energy Association (“GEA”) identifies approximately 7,000 MW of new geothermal power plant capacity in various stages of development in the country.

Geothermal energy development is dependent on a small number of specialized engineering services and technical suppliers with high levels of expertise. Viable geothermal projects depend also on clear legislation and predictable, non-contradictory government regulations for permits and operational licenses. Further, geothermal energy development requires developers with extensive knowledge and experience, as well as off-takers and end-users with a clear understanding of geothermal power operations.

Financing for geothermal project development has always depended heavily on equity investments, primarily because of project development time frames and associated risk elements.  Equity and debt investors must have a clear definition of the specific steam resource contemplated for development, as well as comprehensive understanding of associated drilling risks and other technical details pertinent to geothermal development.

Despite the recent economic downturn and specialized risks associated with geothermal projects, the U.S. government is slated to provide up to $400 million for the U.S. Department of Energy's Geothermal Technologies Program.  These funds are expected to trigger an additional $291 million in matching private investment. In addition, Congress has extended the Production Tax Credit (“PTC”) for new geothermal plants until 2013 and allowed some geothermal projects to select a Cash Grant in lieu of an Investment Tax Credit (“ITC”). These government stimulus initiatives should alleviate financing concerns that have recently plagued geothermal power development.

Geothermal Energy Opportunities
  • American Recovery and Reinvestment Act (stimulus package) and the allocation of much needed resources to current development, as well as increased research and development have raised understanding about geothermal energy.
  • Geothermal energy is a unique renewable energy source because it provides a base-load energy supply.
  • GEA analysis as well as studies by other informed sources point to large geothermal energy development opportunities in the U.S.
Geothermal Energy Challenges
  • Financing, especially with cash and tax equity, will remain challenging in the geothermal sector.
  • Possibility of cyclical weaknesses in electricity prices will raise risk profiles for geothermal power as well as other sources of renewable energy.
  • Drilling expenses associated with geothermal energy development are significant, requiring quarter amounts of equity in early stages of development.
  • Capital formation for geothermal energy projects will continue to be challenging.  In the near term, financing costs will remain relatively high, impacting projects’ anticipated returns. Geothermal energy will also compete for financing with other renewables like wind and solar.
  • On the other hand, investors who financed geothermal projects in the past like pension funds could return to the sector.

Vert Investment Group understands the complexities of financing geothermal energy projects and works with leading geothermal engineers across the United States.  Vert also has strong ties with leading financial institutions and private investors who understand the resource. These investors are looking for stable, long-term investment opportunities similar to those which many geothermal energy projects provide. For information about how Vert Investment Group can support your geothermal project, we invite you to call (713) 222-8378 or click on the Contact Us link on this page to send an e-mail.  A Vert Investment Group team member will respond immediately.

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